217 F. Supp. 3d 678
W.D.N.Y.2016Background
- Acquest Holdings sued Travelers for breach of a crime-insurance policy, alleging employee-manager Brian Vanderburgh colluded with contractor RDC to embezzle funds from a VA outpatient facility project.
- Plaintiff first received tips from former RDC employees in March 2014 and filed a police report; it alleges it only had suspicion at that time.
- Plaintiff received a Nevada State Contractors Board (NSCB) Notice of Hearing and documents on December 16, 2014, which it says first provided sufficient facts to "discover" a loss under the Policy.
- Plaintiff gave notice to Travelers on February 1, 2015, and submitted a Proof of Loss Feb. 10, 2015 (revised June 4, 2015); Travelers denied the claim June 29, 2015, citing untimely notice and failure to provide a sworn proof within 120 days.
- Travelers moved to dismiss under Rule 12(b)(6), relying on numerous extrinsic documents (policy, police report, NSCB materials, proofs of loss, denial letter) to argue discovery occurred in March 2014 and Plaintiff’s 11-month delay was unreasonable.
- The Court limited its review on the motion to the Complaint and the Policy, rejected consideration of the other extrinsic materials at the 12(b)(6) stage, found the timeliness/discovery issue to be fact-bound, and denied the motion to dismiss.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether extrinsic documents (police report, NSCB materials, proofs, denial letter) may be considered on Rule 12(b)(6) | Only the Policy is incorporated; other materials are not incorporated/integral and thus cannot be considered without converting to summary judgment | Documents are referenced by Plaintiff, are in Plaintiff's possession, contradict the Complaint, and may be considered | Court: Only the Policy is incorporated; other extrinsic documents are not properly considered on 12(b)(6) (denied conversion) |
| When Plaintiff "discovered" a loss for notice-duty purposes | Discovery occurred Dec. 16, 2014 (NSCB materials gave sufficient facts); March 2014 was mere suspicion | Discovery occurred March 1 or March 10, 2014 (tips + police report); notice 11 months later was unreasonable as a matter of law | Court: Whether discovery occurred in March 2014 or Dec. 2014 is a factual question; cannot be decided on 12(b)(6) |
| Whether Plaintiff’s February 2015 notice and proofs complied with Policy timing (120-day sworn proof, prompt notice) | Plaintiff lacked sufficient detail earlier and could not submit sworn proof in March 2014; timeliness of February 2015 notice depends on when discovery occurred | Even if discovery was Dec. 2014, 50-day lapse to Feb. 2015 was unreasonable as a matter of law | Court: Timeliness and compliance are fact-specific; not resolved on motion to dismiss |
| Whether complaint states a plausible breach-of-contract claim | Complaint pleads contract, performance, breach (denial), and damages | Travelers contends pleading fails because of alleged untimely notice and missing sworn proof | Court: Complaint plausibly alleges breach of contract; motion to dismiss denied |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (standards for pleading plausibility)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility pleading standard)
- Goel v. Bunge, Ltd., 820 F.3d 554 (scope of materials reviewable on Rule 12(b)(6))
- Chambers v. Time Warner, Inc., 282 F.3d 147 (documents "integral" to complaint doctrine)
- Cosmas v. Hassett, 886 F.2d 8 (mere quotation/reference does not incorporate document)
- DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104 (no material factual disputes about authenticity/relevance for integral-doc exception)
- Am. Sur. Co. v. Pauly, 170 U.S. 133 (definition of discovery in fraud/insurance context)
- Deso v. London & Lancashire Indem. Co. of Am., 3 N.Y.2d 127 (reasonableness of notice generally a fact question)